Financial Plan

AAA

DEFINITION of 'Financial Plan'

A comprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.

Most individuals work in conjunction with an investment or tax professional and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing the plan. These will be used along with estimates of asset growth to determine if a person's financial goals can be met in the future, or what steps need to be taken to ensure that they are.

INVESTOPEDIA EXPLAINS 'Financial Plan'

While there is no specific template for a financial plan, most licensed professionals will include knowledge and considerations of the client's future life goals, future wealth transfer plans and future expense levels. Extrapolated asset values will determine whether the client has sufficient funds to meet future needs.

A good financial plan can alert an investor to changes that must be made to ensure a smooth transition through life's financial phases, such as decreasing spending or changing asset allocation. Financial plans should also be fluid, with occasional updates when financial changes occur.

RELATED TERMS
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a ...
  2. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  3. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  4. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  5. International Association Of Financial ...

    A not-for-profit, professional society dedicated to promoting ...
  6. Financial Planner

    A qualified investment professional who helps individuals and ...
RELATED FAQS
  1. What is the best ETF for trading mid-cap stocks?

    Mid-cap stocks are those from companies with a market capitalization of between $2 billion and $10 billion. Exchange-traded ... Read Full Answer >>
  2. Who benefits the most from prepaid expenses?

    Prepaid expenses benefit both businesses and individuals. Prepaid expenses are the types of expenses that are bought or paid ... Read Full Answer >>
  3. What's the difference between a financial advisor and a financial planner?

    A financial advisor can be a financial planner. However, the term is not limited to financial planning in and of itself. ... Read Full Answer >>
  4. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your ... Read Full Answer >>
  5. Which popular professional certification exams do not require sponsorship?

    The Financial Industry Regulatory Authority (FINRA) administers several professional certification examinations that do not ... Read Full Answer >>
  6. What financial certifications or exams do I need to complete in order to qualify ...

    In general, most states require the successful completion of the Series 65 exam or both the Series 7 and Series 66 exams. ... Read Full Answer >>
Related Articles
  1. Retirement

    7 Counterintuitive Retirement Strategies That Work

    We address seven investment misconceptions, and how you can make your retirement plan make sense.
  2. Options & Futures

    Tailoring Your Investment Plan

    Start your own investing adventure with the help of some simple guidelines.
  3. Professionals

    Start Your Own Financial Planning Firm

    Read on to find business tips to make your dream a reality.
  4. Retirement

    Financial Planning: It's About More Than Money

    Determine what you need to do now to make a drastic lifestyle change later.
  5. Budgeting

    Starting Early With Financial Planning

    You can achieve your financial goals if you start early enough. Here are some tips.
  6. Personal Finance

    How To Effectively Use Financial Planning Software

    The right financial planning software provides clients with reports that help them achieve their financial goals.
  7. Retirement

    5 Retirement Questions Everyone Must Answer

    Find out what information you need to guide your planning and achieve your goals.
  8. Budgeting

    Sneaky Strategies That Fuel Overspending

    Find out how to avoid six of the worst vender ploys this holiday shopping season.
  9. Retirement

    Money Can't Buy Retirement Bliss

    Emotional snags can ruin your future happiness. Learn how you can avoid them.
  10. Brokers

    A Day in the Life of a Financial Advisor

    Financial advisors do a lot more than just manage portfolios, including prospecting, marketing, client servicing, compliance and administration.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!